Ambarella (AMBA) Is Today's Dead Cat Bounce Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Ambarella ( AMBA) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Ambarella as such a stock due to the following factors:

  • AMBA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $91.6 million.
  • AMBA has traded 284,936 shares today.
  • AMBA is up 3% today.
  • AMBA was down 6.6% yesterday.

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More details on AMBA:

Ambarella, Inc. develops semiconductor processing solutions for video that enable high-definition (HD) video capture, sharing, and display worldwide. AMBA has a PE ratio of 39.2. Currently there are 4 analysts that rate Ambarella a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for Ambarella has been 1.2 million shares per day over the past 30 days. Ambarella has a market cap of $1.1 billion and is part of the technology sector and electronics industry. Shares are up 1.6% year-to-date as of the close of trading on Monday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ambarella as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including premium valuation and disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 24.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • AMBA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 5.98, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for AMBARELLA INC is rather high; currently it is at 65.01%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 19.82% trails the industry average.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market on the basis of return on equity, AMBARELLA INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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